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‘More growth to come in CEE office and logistics’

The office and logistics sectors are poised for further growth in CEE, experts agreed at Real Asset Media’s CEE Investment Briefing, which was held at Colliers International’s London offices last week.

‘From an occupier perspective CEE is a very attractive proposition,’ said Stuart Beety, Senior Vice President Business Development, Skanska Commercial Development Europe. ‘The cities are outperforming in terms of growth and connectivity but also talent, with a highly educated workforce’.

A fast-rising sector is Business Process Outsourcing (BPO) shared services centres. ‘Poland is now third in the world after China and India in the BPO market, because it allows significant operational savings for large companies,’ he said.

Stuart Beety, Senior Vice President Business Development, Skanska Commercial Development Europe, Wojciech Koczara, Partner, Head of CEE Real Estate, CMS, Freddie James, Assistant Fund Manager, Tritax, Dorota Wysokińska-Kuzdra, Senior Partner, Head of Corporate Finance CEE, Colliers International and Kevin Turpin, Regional Director of Research, CEE, Colliers International discuss the opportunities available in the CEE Real Estate Investment market. Filmed at the CEE Investment Briefing, London, November 2019 by Real Asset Media.

The trend started in the regional cities and has reached Warsaw only recently. ‘It has grown tremendously quickly,’ Beety said. ‘The market for back office has just started and it will lead to more demand for offices’.

At the moment the percentage of office space per inhabitant is 1.6% in Warsaw, compared to 5% in the German cities, so there is a long way to go. ‘Supply is increasing by 20% in the Polish capital, but demand and investor appetite are growing faster’, he said. Despite the additional stock, there is still a shortage.

‘There is a huge amount of investment going into BPO shared services centres,’ said Kevin Turpin, Regional Director of Research, CEE, Colliers International. ‘They are very cost sensitive, so wage growth is a negative for BPO centres, while it is positive for retail because people have money and enjoy spending it’. 

Unemployment is at record lows and salaries have been rising in the region but from a very low base, he said: ‘Labour costs have been going up but they are still low in comparison to Western Europe. They are now 50% instead of a third, so there is still a massive gap and big savings for companies’. 

Existing and future infrastructure is another incentive for logistics investors in a region which already has geography on its side.  

‘Poland and in particular the Lodz region is in a perfect location at the crossroads of Europe between East and West, road links are great and infrastructure is improving all the time,’ said Freddie James, Assistant Fund Manager, Tritax. ‘Now it also has the Chinese rail link which allows freight to reach China in 12 days, half the time it takes to ship to the same location’. 

With a strong domestic market and good access to strong neighbouring markets and countries beyond, Poland is an obvious choice for logistics investors, he said: ‘We like the quality of the real estate, of the covenants and of the people. We are a newcomer to the region, but we hope to invest more in the future’.

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